Important takeouts:
Historical data does not provide a consistent link between rising Bitcoin prices and rising US debt caps.
Bitcoin’s resilience reflects investors’ belief that the US dollar continues to lose its value due to US domestic fiscal policy.
The US Senator successfully advanced President Trump’s “One Big Beautiful Bill” on Tuesday, taking a step closer to becoming the law. The proposed increase in the $5 trillion debt cap has sparked serious controversy, and many Bitcoin (BTC) supporters believe the move could be the greatest catalyst ever in 2025.
While some robust analyses show a bullish outlook for Bitcoin, past US debt caps have led to generally bearish results, at least in the next six months. In fact, the June 2023 event exists as the only instance that BTC has since been obtained.
Some may argue that the prices of these developments will be sold to the market in advance. However, looking at Bitcoin’s flat performance weakens that assumption. On Tuesday, Bitcoin was stable at $105,000, the same level as five months ago.
Bitcoin’s resilience came amid widespread expectations that the Trump administration would drive an increase in debt caps. At the time, economists predicted that the government would run out of funds by mid-August.
Bitcoin Bull Run holds little relations with the US debt cap
The Non-partisan Congressional Budget Office estimates that the proposed legislation will add at least $3.3 trillion to the federal deficit over the next decade. The nearly 900-page bill was passed by the Senate with one voting rights and is now back in the U.S. House of Representatives.
Northmantrader founder Sven Henrich criticized U.S. Treasury Secretary Scott Bessent’s claims as representing a step towards “controlling US debt.”
According to Henrich, the debt cap has been raised while interest rates are “running a record deficit,” and is consistent with “modern financial theory.” This suggests that governments can fund spending by creating money, not through taxes or borrowing.
Rather than focusing solely on lawmakers’ decisions, attention should be focused on how central banks respond. If the US Federal Reserve maintains higher interest rates, debt service costs will rise. Meanwhile, a gradual shift to monetary policy could undermine the strength of the US dollar.
Generally speaking, the yields of the US Treasury reflect a decline in investor confidence. This is because buyers require greater compensation for perceived risks. Historically, this indicator has a positive correlation with Bitcoin prices. That is, given its appeal as an alternative asset for cryptocurrency, both tend to rise together.
So, Bitcoin holds over $105,000, but the 10-year Treasury yield fell to 4.25% from 4.50% on June 6th. Still, it’s too early to declare Bitcoin a proven reserve asset, especially as both Gold and the S&P 500 are approaching their all-time highs.
Related: Bitcoin holds steady as the main catalyst aligns for breakouts above $110k
In fact, the broader market appears to be priced at weaker US dollars, as evidenced by the capital that flows into assets that traditionally benefit from the currency collapse, such as stocks, commodities, and Bitcoin itself.
According to Cobessy’s Letter, a dollar devaluation occurs as investors respond to tariffs, the US deficit spending crisis and pressure on the Fed.
Ultimately, the increase in the debt cap could coincide with a Bitcoin rally above $110,000, but the historic pattern does not support a direct causal relationship between these events.
This article is for general informational purposes and is not intended to be considered legal or investment advice, and should not be done. The views, thoughts and opinions expressed here are the authors alone and do not necessarily reflect or express Cointregraph’s views and opinions.
